WSR 07-12-056

PROPOSED RULES

OFFICE OF

INSURANCE COMMISSIONER

[ Insurance Commissioner Matter No. R 2007-02 -- Filed June 4, 2007, 8:25 a.m. ]

Original Notice.

Preproposal statement of inquiry was filed as WSR 07-09-101.

Title of Rule and Other Identifying Information: Market conduct oversight.

Hearing Location(s): Insurance Commissioner's Office, 5000 Capitol Boulevard, Room 221, Tumwater, WA 98504, on July 10, 2007, at 11:00 p.m.

Date of Intended Adoption: July 17, 2007.

Submit Written Comments to: Kacy Scott, P.O. Box 40260, Olympia, WA 98604-0260 [98504-0260], e-mail kacys@oic.wa.gov, fax (360) 586-3535, by July 9, 2007.

Assistance for Persons with Disabilities: Contact Lorie Villaflores by July 9, 2007, TTY (360) 586-0241 or (360) 725-7087.

Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: These rules individually and as a whole are expected to provide uniformity and consistency. The expected uniformity and consistency will be not only in Washington specific market conduct oversight activity, but also between Washington and other states.

Reasons Supporting Proposal: Section 7(4) of ESSB 5717 requires the adoption by rule of procedures manuals and data call formats to be used in the market conduct oversight process.

Section 6(3) of ESSB 5717 identifies general classes of information to be used in the market conduct oversight process. This proposed rule will provide more specific identification of documents and information most likely to be accessed in the market conduct oversight process.

Section 6(2) of ESSB 5717 requires regulated entities to file market conduct annual statements with the commissioner. This proposed rule identifies the form and instructions to be used to make those annual statement filings.

Section 6 (3)(c) of ESSB 5717 requires the adoption by rule of a process for insurer complaint verification before complaint data can be uploaded to NAIC or used in market conduct oversight activities after July 1, 2007.

Section 14(3) of ESSB 5717 requires the adoption of a rule establishing a mediation process to resolve insurer disputes arising from market conduct oversight activities.

Statutory Authority for Adoption: RCW 48.02.060, chapter 82, Laws of 2007.

Statute Being Implemented: Chapter 82, Laws of 2007.

Rule is not necessitated by federal law, federal or state court decision.

Name of Proponent: Mike Kreidler, insurance commissioner, governmental.

Name of Agency Personnel Responsible for Drafting: Melodie Bankers, P.O. Box 40260, Olympia, WA 98604-0260 [98504-0260], (360) 725-7039; Implementation: Jim Odiorne, P.O. Box 40255, Olympia, WA 98604-0255 [98504-0255], (360) 725-7214; and Enforcement: Carol Sureau, P.O. Box 40255, Olympia, WA 98604-0255 [98504-0255], (360) 725-7050.

No small business economic impact statement has been prepared under chapter 19.85 RCW. Chapter 19.85 RCW requires state agencies to prepare a small business economic impact statement for proposed rules in certain circumstances. However, RCW 19.85.025(3) states: "This chapter does not apply to the adoption of a rule described in RCW 34.05.310(4)." RCW 34.05.310(4) states: "This section does not apply to: ...(iii) Rules adopting or incorporating by reference without material changes...Washington state statutes...(v) Rules the content of which is explicitly and specifically dictated by statute..." Therefore, the office of insurance commissioner is not required to prepare a small business economic impact statement for the proposed rules to implement chapter 82, Laws of 2007.

A cost-benefit analysis is not required under RCW 34.05.328. This proposal is not a significant legislative rule for the purposes of RCW 34.05.328.

June 4, 2007

Mike Kreidler

Insurance Commissioner

OTS-9736.4

Chapter 284-37 WAC

MARKET CONDUCT OVERSIGHT PROGRAM


NEW SECTION
WAC 284-37-010   Definitions.   The following definitions apply throughout this chapter unless the context requires otherwise:

(1) "Insurer" shall have the same meaning as set forth in chapter 82, section 5(4), Laws of 2007, and specifically includes health care service contractors, health maintenance organizations, fraternal benefit societies, and self-funded multiple employer welfare arrangements.

(2) "Insurance" shall have the same meaning as set forth in RCW 48.01.040, and includes all policies and contracts offered by any insurer, as defined in subsection (1) of this section.

(3) "Complaint" means any written or documented oral communication primarily expressing a grievance, meaning an expression of dissatisfaction.

(4) "NAIC" means the National Association of Insurance Commissioners, and has the same meaning as in RCW 48.02.140.

(5) "Records" means any information from data available to the commissioner, surveys, required reports, information collected by the NAIC and other sources in both public and private sectors, and information from within and outside the insurance industry.

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NEW SECTION
WAC 284-37-020   Procedures manuals.   To foster nationwide consistency in market conduct oversight, and as authorized by chapter 82, sections 6, 7 and 8, Laws of 2007 the commissioner adopts the following procedures and handbooks published by the NAIC and in effect on July 31, 2007, or as later amended:

(1) The NAIC Market Regulation Handbook for all market conduct oversight activities, as defined at chapter 82, section 5(9), Laws of 2007.

(2) The NAIC Market Conduct Uniform Examination Procedures for all market conduct examinations, as defined at chapter 82, section 5(10), Laws of 2007.

(3) The NAIC Standard Data Request for all requests to insurers for market data, as defined at chapter 82, section 5(11), Laws of 2007.

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NEW SECTION
WAC 284-37-030   Access to records.   During the market analysis process, the commissioner may require access to identifiable records in the possession of the insurer. This section sets forth the process that the commissioner will follow when requesting records.

(1) The commissioner will contact the insurer in writing listing the records to be reviewed.

(a) The list will specify the records required by the market conduct oversight personnel and will set forth the preferred method for transmission of records to the market conduct oversight team.

(b) The request will include the reason for the request and summarize how the records are intended to be used.

(2) All requested records must be sent to the commissioner within fifteen working days after the date the request is sent to the insurer.

(3)(a) If the insurer is not able to produce the requested records within the allotted time, the insurer must contact the commissioner before expiration of the allotted time and propose an alternative due date. The request must provide information about its reason for requesting a later due date.

(b) If the insurer is not able to produce the requested records in the format or manner requested by the market conduct oversight team, the insurer must contact the commissioner before expiration of the allotted time and propose an alternative delivery format.

(4) The commissioner will contact the insurer within five working days after receipt of any request for a later due date or alternative delivery format to discuss the proposed alternatives.

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NEW SECTION
WAC 284-37-040   Market conduct annual statement.   (1) Every insurer shall file with the commissioner its market conduct annual statement, as required by chapter 82, section 6, Laws of 2007, in accordance with filing instructions published by the NAIC.

(2) For purposes of this chapter, the market conduct annual statement filing is not complete until it has been received by the commissioner, in either hard copy or electronic form, as designated by the commissioner.

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NEW SECTION
WAC 284-37-050   Complaint verification.   If a complaint is filed against an insurer, the commissioner will notify the insurer following this process. Whenever possible and appropriate, the commissioner will provide the notices detailed below to the insurer electronically.

(1) Initial notice to the insurer. The commissioner will send an initial notice to the insurer that identifies the name of the insurer against whom the complaint was filed using the insurer's name and NAIC number, and any other available identifying information as provided to the commissioner by the complainant.

(a) If the insurer disagrees with the name of the insurer as identified in the complaint, it must file an objection in writing no later than fifteen business days after the date the commissioner sends the notice to the insurer and attach appropriate supporting information or documentation.

(b) Failure of the insurer to object to the legal name and NAIC number provided in the initial notice of the complaint within the allotted time, will be considered to be the insurer's verification that the proper insurer is identified in the complaint and that the coding is correct.

(c) No extension of time to respond to the initial notice will be permitted except for good cause shown.

(2) Complaint closure notice. The commissioner will send a copy of the proposed complaint closure notice that will be reported to the NAIC to the insurer at the time the complaint is closed. The complaint closure notice will identify both the type of coverage and reason for complaint.

(a) If the insurer wishes to object to the coding to be reported to the NAIC, an objection must be filed with the commissioner within fifteen business days after the date that the complaint closure notice is sent to the insurer. The objection must contain a concise description of the nature of the objection to the proposed coding and must include appropriate supporting information or documentation.

(b) Upon receipt of the insurer's objection, the commissioner will take reasonable and necessary steps to prevent reporting of that complaint to the NAIC until the insurer's objection is resolved.

(c) Failure of the insurer to object to the proposed coding set forth in the complaint closure notice will be considered verification that the complaint closure notice uses the correct codes and the notice will be reported to the NAIC.

(3) Opportunity to object to coding to be reported to the NAIC.

(a) Within ten business days after the commissioner receives an objection to proposed coding from the insurer, the commissioner will consider the information or documentation provided by the insurer and will advise the insurer that the original proposed coding has been affirmed or modified.

(b) The final complaint coding will be reported to the NAIC no sooner than five business days after resolution of an objection.

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NEW SECTION
WAC 284-37-060   Dispute resolution.   As required at chapter 82, section 14(3), Laws of 2007, after the deputy insurance commissioner responsible for market conduct oversight has responded to an insurer's issues, the insurer may request mediation of the issues. The following process governs mediation of insurer market conduct oversight issues.

(1) A request for mediation of the issues must be made within five business days after the date a final decision on any issue is sent to the insurer.

(2) The commissioner will maintain a list of approved mediators to mediate disputed issues. All approved mediators will be qualified by training and experience.

(a) The commissioner will publish a copy of the current resume and fee schedule of each panel mediator on the commissioner's web site (www.insurance.wa.gov).

(b) At the start of a market analysis process or the start of a market conduct examination, the insurer must select a mediator and alternate mediator from the approved list.

(c) The party requesting mediation is required to pay the costs of the mediator.

(3) As provided at chapter 82, section 14(4), Laws of 2007, at any point in the mediation, the insurer may commence an adjudicative proceeding under chapters 48.04 and 34.05 RCW.

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Washington State Code Reviser's Office